Don't believe mkts will take highs in 2010: Parag Saxena

Nifty BSE | NSE 31/05/12 Are Mutual Funds betting on Nifty?

Q: Was it the same organised buying that took the price of oil to where it was a couple of year or year and a half back?

A: I very much believe that. I think that it began with very focused pools of money that were focused on commodities which largely bought oil, on pure oil related funds as well then in that same bandwagon hedge funds, which started to put disproportionate amounts of their assets into oil.

Q: What disillusioned them?

A: The end point of this disillusionment, a very interesting study if you go back and look at the hunts when they tried to get around silver and corner the silver market in the late 70s, early 80s, it peaked out in January 1980, and that was the last big rise in the price of gold too, that is when gold crossed USD 800 per ounce and then it fell back to under USD 300 per ounce.

At the end point you have to find somebody who is going to buy that stuff, so you keep buying it, you squeeze the market but then at the end of it you do have to find someone to sell it because you have got such a lot of it. If all the interest rate buyers have already bought whatever it is gold, silver, oil then selling that starts to become a challenge. So at some point rationale man on the street stops and says that is absurd and that begins a trend.

Q: Absurd at what point for oil at USD 120 per barrel?

A: I guess it was at that level the last time around. Oil is a different thing from gold though. Oil is depreciating, the planet is growing and if you study what happens to the compounding effect of the planet, people on the planet growing at what sound like small numbers but 1.5% population growth and if you look at the depreciation of oil even at modest rates, that is a lethal combination for oil. So that crunch will come.

Q: What is the outlook on oil for you?

A: What I am saying is a long-term outlook and its guidance is only that we should be looking at other forms of energy particularly in places like India, which are oil short. We should be looking at other ways to raise energy for our people.

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